CAG exceeded its brief, used hindsight to question decision: RIL

The oil major was referring to the audit of spending on eastern offshore KG-D6 block

Reliance Industries has accused CAG of exceeding its audit brief in audit of spending on eastern offshore KG-D6 block saying hindsight is being used to question operational decisions taken eight years back.

RIL in a presentation at an Exit Conference called by CAG at the end of its second audit KG-D6 for 2008-09 to 2011-12 stated that use of hindsight to question project efficiencies and procurements "could be easily perceived as a performance audit which obviously was not the stated intent of Audit."

"Inspite of the assurance that this is not a performance audit, the benefit of hindsight seems to have been used to question the efficiency, effectiveness and economy of not only contracts but also assess the prudence of operational decisions taken as many as eight years ago," it said.

In a separate letter to the DGH in response to draft audit observations, RIL said, "the audit team has exceeded the proper scope of an audit under Section 1.9 of the Accounting Procedure to the PSC by commenting on the commercial, operational and technical performance of the Contractor and by providing its own legal interpretation of provisions contained in the PSC."

An audit under Production Sharing Contract (PSC) must be limited to the verification of charges and credits recorded in the accounts against actual amounts incurred, paid and received.

"In particular, we are concerned to see comments that appear to be arriving at a conclusive opinion as to the proper legal interpretation of PSC provisions concerning matters that are in dispute and already the subject of arbitration proceedings between the Government and the Contractor," RIL said.

RIL said the CAG appears to conclude that the Contractor was required under the PSC to achieve the levels of gas production estimated in the approved field development plan and that the government is entitled disallow cost recovery for under-utilisation of facilities.

"However, the interpretation of such provisions is already the subject of an arbitration proceeding... We respectfully submit that matters such as this should be left to be resolved by the arbitral tribunal and doing otherwise would be to undermine the arbitral tribunal and the dispute resolution provisions contained in the PSC," it said.

RIL said at several places in the draft Audit Report the CAG's audit team has merely paraphrased its responses and then dismissed them with a vague "we disagree" without specifying the reasons for not accepting our responses.

To CAG, it said, the PSC procurement procedures were intended to differ from government/PSU procurement procedures and to promote investment efficiency, faster decision making in the interest of the project.